R3 - Spoilage

Reducing defects helps to reduce costs, but does not make the business more competitive.

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Reworked goods are unacceptable units of production usually not capable of being repaired or converted into a salable product.

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The value of scrap material can have either a high or low sales value relative to the product with which it is associated.

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Normal spoilage adds to the cost of the job to which it is attributed in a job order costing system.

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When calculating normal spoilage rates, the base should be actual units started in production.

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Abnormal spoilage is spoilage that should arise under efficient operating conditions.

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A company whose goal is zero defects would usually treat all spoilage as abnormal.

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Counting spoiled units as part of output units in a process-costing system usually results in a higher cost per unit.

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Costs in beginning inventory are pooled with costs in the current period when determining the costs of good units under the weighted-average method of process costing.

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Under the weighted-average method, the costs of normal spoilage are added to the costs of their related good units. Hence, the cost per good unit completed and transferred out equals the total costs transferred out divided by the number of good units produced.

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